Neither is as straight forward as it looks, so here is a tutorial for both.

To add an inline image to an email you are composing in Gmail:

1. In Gmail, click the compose button, once clicked, make sure you have rich formatting on by clicking the link above the compose message area. If you already see icons above your compose message area such as B (for bold) and I (for Italic), rich formatting is already on.

2. Adding an image into the compose message area is not on by default, follow the Settings link in Gmail. Go to the Labs tab. Make sure Enable is selected for Inserting images. Click Save Changes.

3. Click the compose button, and with rich formatting on, you’ll now see a new button added to rich formatting called insert image.

Rather than uploading your letterhead image from your hard drive every time you compose a message, you can also add it from a web address (URL). There are many free image hosting sites where you can store your letterhead, such as photobucket.com or flickr.com.

Unlike adding a signature, which will always be there once you compose a message, you’ll have to add the letterhead image every time you compose a new message.

Try not to make your letterhead image too wide, if its too wide the image may not fully show on the various email clients out there.

If however you do not wish to add a letterhead image to your message, you can add a small logo to your signature.

Once set, a signature will appear below your composed message every time you create an email.

A signature can include an image or logo, your name, your website, your telephone number and your address. Its up to personal preference how much you wish to include.

To set up a signature automatically added to emails you compose in Gmail:

1. Follow the Settings link in Gmail’s top right navigation menu.

2. Click on General.

3. Scroll down to signature and select signature with the radio button, make sure the desired account is selected under signature.

4. Type the desired signature in the text field.

With rich formatting already on, and images already enabled. You can add an image to your signature as previously stated.